When these are taken into account, LNG’s life-cycleenvironmental economics are worse than those of coal.

Unchecked, uncounted and unpriced, these emissions distort global energy markets so badly they’ll ensure uncontrolled climate change. The only way to fix this is to properly count and price these emissions.

Doing so reveals LNG’s true economic folly.

It will also ringfence value destruction by limiting it to feckless investors rather than society at large. The reason: LNG industryinvestors should have known this or should have asked — or worse — knew it, asked about it and then ignored it.

Below we make the case against LNG’s environmental economics through citing readily-verifiable, publicly-available sources.What they indicate is end-to-end carbon emissions from the global LNG trade are far worse than industry officials disclose.

For years, the half-truth spouted by the natural gas industry — and you still see it repeated virtually verbatim everywhere —is that Liquid Natural Gas is a critical transition technology to a clean energy future because natural gas is a low emission fuel.

That’s a lie atop a half-truth.

When combusted to make electricity, natural gas emits (estimates vary, but not by much) about 0.4 tonnes of carbon dioxide (and equivalents) per megawatt-hour of electricity produced.

Coal, by contrast, emits anywhere from about 0.65-1.1 tonnes per megawatt-hour, depending on the coal.

What these LNG figures artfully leave out are the sizable emissions in the LNG production and delivery chain.

These include emissions from extracting the natural gas from wells in the first place (including methane emissions, which aren’t counted), pipelining the natural gas to coastal ports, liquefying it into LNG, ocean shipping, regasification, pipeline delivery to power plants andthencombustion for electricity.

When these are added in — as they should be — the emissions of natural gas shipped to market as LNG to create electricity generates greenhouse gas emissions of around 600-700 kgs of carbon per megawatt hour. Natural gas all by itself emits about 400.Coal emits 800 or more.

That makes LNG only slightly better than coal in terms of carbon emissions at huge investment and environmental cost.

Below we present charts of LNG’s life-cycle emissions from different sources. We then combine these into a summary chart.

When this emissions difference is counted and priced, LNG’s environmental economics disappear. The upshot: investors have been suckered, markets distorted, the environment degraded and huge costs shoved on to future generations.

That’s hardly the definition of a clean transition fuel.

Below is a chart from the US Department of Energy (DOE). In a 2014 report, the DOE estimated LNG’s life-cycle carbon emissions of 600-800 kilograms of carbon per megawatt hour of electricity produced.

Source: “Life Cycle Greenhouse Gas Perspective On Exporting Liquefied Natural Gas From the United States, 2014,” US Department of Energy

That’s 50-100% higher than the 400 kilos of carbon emissions the LNG industry likes to use. The industry does thisby counting only the downstream combustion of natural gas. It simply excludes the upstream emissions of mining, compressing and uncompressing and transporting.

For comparison in the chart above, we added solar energy’s 40 kilograms (yes 40) of carbon on a comparable life-cycle basis, and wind’s tiny 12. These are an order of magnitude lower than natural gas, and 1.5 orders of magnitude lower than the life-cycle emissions of Liquid Natural Gas.

These are not one-off figures. They permeate research on the subject across the board. Take the US Office of Fossil Energy. It came up with life-cycle emissions of natural gas shipped to market as LNG of 630 kg/Mwh.

LNG Life Cycle Greenhouse Gas Emissions

Life-Cycle carbon emissions of 600-700 kgs per mwh result from natural gas electricity delivered to market as LNG.

Peer-reviewed research published in the journal Environmental Science and Engineering also has similar figures

LNG Life Cycle Greenhouse Gas Emissions

Research at Carnegie Mellon University came up with LNG emissions of nearly 900 kilograms of carbon per megawatt-hour. This research included the effect of uncounted methane emissions of LNG and their dramatic shorter-term global warming impact.

The Liquid Natural Gas industry lobby the International Gas Union sees things differently, standing alone in estimating the life-cycle emissions of LNG as much lower than anyone else.

LNG Life Cycle Greenhouse Gas Emissions

The International Gas Union claims LNG has only emissions of .6-.6 tonnes mwj. far belwo other estimates.

An outlier here, however, is the International Gas Union. This is the industry group that promotes the global LNG industry.

It puts life-cycle emissions at about 600 kg of carbon per Mwh.

Another interesting element is how the Liquid Natural Gas industry lobby the International Gas Union, sees things differently from other researchers. The IGU has the lowest estimate of greenhouse gas emissions.

With some variations, the above indicates general agreement on the scale of emissions from the LNG trade.

An outlier here, however, is the International Gas Union. This is the industry group that promotes the global LNG industry.

It puts life-cycle emissions at about 600 kg of carbon per Mwh.

Summary Emissions of LNG-Shipped Natural Gas

Low

High

Middle

US Dept. Energy

600

800

700

US Technology Energy Laboratory

575

725

650

Environmental Science & Engineering

600

800

700

International Gas Union

550

650

600

Average

585

715

650

Putting all these numbers together in place indicates a midrange of 575-725, or 650.

That’s a mere one-third reduction from coal and 50% higher than the emissions profile of natural gas combustion alone that the LNG industry universally cites. These figures also do not count methane emissions. Clean energy? It looks a stretch on the numbers.

This matters because the LNG industry has for years used such selective numbers to win regulatory, environmental and investment approval for a massive multi-hundred billion dollar global expansion with an amortization period stretching out to 2040 and beyond.

If this holds, it’s no exaggeration to say that 4c warming by mid-century is not implausible. Warming on that scale puts civilization in peril, all for the profits of a single industry.

Properly carbon priced, natural gas shipped to market as LNG is uncompetitive against wind and solar. In other words, pricing the now-uncounted carbon emissions of the LNG industry would provide sufficient funding to pay for both battery storage for wind and solar as well as climate adaptation investments now required by the lingering legacy of fossil fuels — of which LNG is just the latest incarnation.

Yes, carbon pricing LNG will raise the prices of electricity produced from natural gas. Destructive climate changes and destroyed coastal cities also will cost money. The issue is one of polluter pays.

Thirty-percent when applied to carbon prices will move upward the carbon-adjusted retail price of electricity generated from natural gas shipped to market as LNG. At present, coastal cities and global health care systems are paying these costs through more severe and damaging storms and treating the physical stress of record heat waves.

Paying these pollution costs through an $80 per tonne carbon price in 2030 (for example) would raise LNG-based electricity prices by 5.2c kwh. $100 carbon price will raise it by 6.5c. That would, in some cases, double the downstream cost of electricity generated from this fuel, bringing the cost of carbon adjusted LNG-produced electricity to 8-12c per kwh, compared to less than 5c/kwh in 2030 for wind and solar.

The difference between these two future prices, 5c and 10c is the implicit subsidy the LNG industry is getting.

As this is realized, markets will shift against LNG. Billions of dollars of global LNG infrastructure will prove uneconomic. When that happens, either the LNG industry will lobby government for assistance, or be forced into micro-economically draconian write downs of LNG capacity that never should have been built had prices signals not been distorted through uncounted carbon.

Carbon pricing’s lost decade and half (2006-2020) will cost the world dearly.

In 2006, some of the earliest traded carbon prices (in the early days of the European Union Emissions Trading Scheme) reached US $36 dollars. That price is around the level experts argue is needed to reduce climate change to manageable proportions by 2050.

Unfortunately, since 2006 prices have gone in the other direction. Most now linger well below $10.

The problem is due to too many carbon emission permits. Market reforms planned for around 2020 may fix this in part, by reducing the number of permits in circulation or creating floors below which prices can’t fall.

At best, it all means a ‘lost decade’ in reducing destructive climate change. This will negatively affect the quality of life on the planet for the rest of the century. What’s desperately needed is transparent, predictable pricing upon which to base future investment plans.

Forecast Carbon Market Prices to 2050

Overallocation of carbon emission permits has caused prices to fall. Restriction of supply and annually-escalating minimum prices after 2020 will bring carbon markets back to life. As this occurs, it will generate the funds needed to invest in clean energy.Sources: Carbon Pulse, RGGI, State of California, Synapse, US GAO, ICIS, Energy Aspects

This 15-year carbon price sleepwalk represents a lost decade and half. During this time, escalating carbon prices could have been progressively decarbonizing the world economy, paying dividends by now.

This would have included faster economic growth and greater accumulation of needed savings to meet the health care and retirement needs of an aging global population.

The US General Accounting Office has estimated the ‘social cost’ of carbon of around US$20, a figure private industry largely agrees with. The sooner this prices achieved, the sooner the financial system can play its role shift funds from fossil fuels to cleaner energy sources.

Had 2008’s $36 carbon prices persisted,the world economy might not now be stuck in a slow-growth phase.

The reason is that carbon prices and elimination of carbon subsidies would have fueled a huge investment boom. This would be paying dividends by now. These would include lower health and insurance costs from air pollution and less severe storms.

At $5.3 trillion, global fossil fuel subsidies now amount to 6.6% of the global economy, or US$132 per tonne, and are increasing by 9% per year. Source: “How Large Are Global Energy Subsidies?,” IMF Working Paper, May 2015

Instead, perverse pricing is perpetuating the problem. At present, fossil fuel subsidies amount to $213 per tonne of carbon.

Carbon Subsidies

Total

Per Tonne

Fossil Fuel Subsidies (US$ millions)

$5,300

$133

Health Impacts (US$ Millions)

$3,200

$80

Total

$8,500

$213

Taken together, fossil fuel subsidies and the health impacts
of climate amount to roughly $8.5 trillion dollars, or about 10% of
the global economy.
Source: “How Large Are Global Energy Subsidies?,”
IMF Working Paper,May 2015

Better carbon markets, fiscal reform, financial and technical innovation. That’s the solution. Undertaking these reforms, the sooner the better, will set the stage for a long economic boom that can solve many of the world’s problems.

The most important of the three changes is eliminating today’s US$5.3 trillion of annual world fossil fuel subsidies. The Group of Sevenhas pledged to do that for the world’s largest economies by 2025. The rest of the world can follow. Everyone will gain.

The second is to raise carbon prices on the world’s 40 billion tonnes of annual emissions from $3 per tonne (the current weighted average) to $50 per tonne.

Fifty dollars a tonne is a future level many energy corporatesalready budget for in the future investment planning.

These reforms will more than pay for themselves. When finished repairing the damage of climate change, they can be applied to paying for an aging global population.

Consider some numbers:

By 2031, eliminated fossil fuel subsidies will free up $5.3 trillion. By that year, falling health costs of dealing with climate change will yield another $1-2 trillion in savings. Raising carbon prices to $50 per tonne will free up another $2 trillion.

Together, these policy changes and their economic benefits will free up $9 trillion a year (roughly seven percent of the world economy) to better uses.

After that, revenue will fall as fossil fuel subsides will hit zero and shrinking emissions yield smaller and smaller carbon revenue. Even with this shrinkage, however, reforms will still produce annual redeployable capital of roughly five percent of the global economy in 2050.

Rising territorial tension in the South China Sea, for instance, can be viewed as abattle over dwindling fossil fuel resources.

China’s ambit claim Nine-Dash line in the South China Sea and its rejection of UN Tribunal jurisdiction in the sea also can be seen this way.

So can China’s recent placement of high-tech oil exploration equipment in waters claimed by Vietnam, as can China’s ham-fisted effort to auction off oil and gas exploration blocks in waters claimed by Vietnam.

Over time, redeployable capital created by properly pricing climate change can be plowed into infrastructure to raise economic growth. This will raise the global economic growth rate, reducing the medium-term drag of higher carbon prices and eliminated price subsidies.

Never in the history of economics has a global macroeconomic problem presented such a clear and unambiguous set of policy solutions.

The policy mix is clear. The world needs certainty. Eliminating fossil fuel subsidies and creating a multi-decade rising price curve for carbon will enable clearer discounting of future investment.

For their part, fossil fuel subsidies can be reduced on a straight line basis. Achieving predictability in carbon levies can be achieved through carbon trading applied to an ever greater proportion of carbon emissions coupled by a minimum floor price below which carbon prices can’t fall.

This has been the fatal flaw of carbon markets to date.

To fix this, forward-looking jurisdictions like Alberta, Canada are now considering hybrid systems of floating carbon prices underpinned by a minimum price. Australia implemented such a system briefly and may resurrect it.

The European Union is well aware of the minimum price problem. The EU almost certainly will include that in 2020 reforms to the European Union Emissions Trading System (EU ETS). China’s also taken note, and plans to incorporate price floors into its various regional carbon trading markets.

With greater policy certainty such as the above, carbon futures markets can allow better management of private risk. America’s NASDAQ already offers futures contracts out to 2020 on the EU ETS. Longer-dated futures will no doubt be introduced after the EU ETS’s 2020 reforms are agreed.

China also is working on a regional futures exchange. Economic reform coupled with zero sum financial market risk management products can solve climate change with capitalism.

Climate changehas been the devastasting result of a failure to apply orthodox economics.

The two are the Trans-ASEAN Gas Pipeline (TAGP) and Trans-ASEAN Electricity Grid (TAEG). The two projects will more deeply integrate the energy economies of Association of Southeast Asian Nations’10members.

They would do this through increasing cross-border natural gas pipeline and electricity interconnections. Six of ASEAN’s 10 members have South China Sea coastlines. Two others have coastlines on the Gulf of Thailand.

The combined cost of the TAGP and TAEG is around $13 billion — a big sum for the AIIB to lend in its first year.

But the economic merit of these two projects and their potential for reducing political tension in the South China Sea make them special.

One way to fund them would be for the AIIB and other multilateral lenders — like the Asian Development Bank, World Bank, Green Climate Fund (and others)to work together in providing the money.

In addition to spreading loan-repayment risk, such cooperation could help encourage creation of common regional technical standards of interconnection.

This would help reduce destructive climate change through making future energy markets more competitive by encouraging greater energy substitution.

Substitution will become increasingly important as carbon pricing spreads. It will allow dynamic relative pricing to alter consumption habits and influence future investments — creating positively-reinforcingcycle.

In coming years, the world must spend up to US$100 trillion building infrastructure and reducing carbon emissions. This spending will largely determine what life is like for humanity later in the century.

Over the short term, funding the TAGP and TAEG mayhinge in part upon China and Southeast Asia reaching political accommodation over disputed areas in the South China Sea.

This accommodation can be reached by by China and her ASEAN neighbors agreeing to create joint development areas that could utilize the infrastructure of the TAGP and TAEG.

This would solve two problems at once:territorial issues and securing reliable future energy supplies. That’s because bits of both the TAGP and TAEG would traverse contested parts of the South China Sea.

So, where to now with this?

In coming weeks, a UN tribunal in the Netherlands is expected to reject the legitimacy of China’s Nine-Dotted Line in which China has laid claim to virtually the entire South China Sea. China is politically isolated on this issue and has painted itself in a corner by saying it will ignore any UN decision that goes against it.

If China holds to that line, it will destroy confidence in the newly-created AIIB. Unfortunately, Chinese domestic propaganda has done little to prepare China’s citizenry for compromise.

Therefore, agreeing to South China Sea joint development areas which postpone territorial finality while enabling economic-growth and employment generating infrastructure investment looks like the best compromise available.

China would benefit as much as anyone. The country has amassed an increasingly destabilizing multi-trillion US dollar cash hoard created by maintaining an artificially weak yuan. This money needs to berecycled back into the world economy.

China has world-class companies capable of building roads, rail systems, power lines and other key infrastructure. These companies are huge domestic employers of Chinese labor. Without new projects these companies may have to engage in politically-destabilizing layoffs.

Viewed, this way, it’s not hard to see AIIB overseas investment as a necessity for China’s domestic macroeconomic management as much as it is a ‘coming out’ gift of a beneficent new world power.

In other words, China needs to build international infrastructure projects as much as the rest of the world needs to have them built. This symbiosis alone should ensure cooler heads prevail.

For the AIIB, infrastructure investments in Southeast Asia connecting offshore joint development areas offer the institution the opportunity to end doubts regarding its independence, probity and governance.

The AIIB, of course, would do this through playing a leading role funding an unparalleled opportunity to calm perhaps the world’s most worrisome trouble spot: the South China Sea.

A bundle of benefits now await Asia. The ball’s in the court of the region’s statesmen. Everyone has reason to hope and prey they see the benefits.

As the world economy grapples with deflation, spending big on infrastructure could be just what’s needed.

Expanding cross-border electricity links in coming years will largely follow the pathways laid down by fiber optics since the 1990s.Sources: State Grid Corp of China, Siemens, Institute of Electrical and Electronics Engineers (IEEE), Grenatec, North Sea Offshore Grid Initiative and others.

Funded by central banks, it would be ‘monetized infrastructure investment.’ A more colloquial name would be ‘infrastructure helicopter money.”

The impact would be the same. The investment would spur demand across a host of industries.

It would create badly-needed global economic growth through government spending and its multiplier effect. The long-term bonds created to fund it could then be distributed to government retirement schemes.

There, the bonds would generate the future repayment streams needed to fund the looming public retirement obligations. These are now met via increasingly unsustainable ‘pay-as-you-go’ schemes.

The good news is that government infrastructure investment creates future revenue streams. Government retirement obligations create future revenue outlays. They just occupy opposite sides of the ledger.

Infrastructure and retirement needs are easy to forecast up front. At present, both are underfunded. Supplemented by carbon prices, the benefits of monetized infrastructure investment compound. The results: improved fiscal solvency, a solution to underfunded government retirement programs and a more efficient global economy.

The proposal here is for nothing short of a post World War II Marshall Plan or 1960s-era moon shot for energy. This time, however, the aim would be to solve climate change and fund the needs of an aging global population instead of rebuilding shattered countries from global war.

Since the 1990s, wiring the world with fiber optic cables and developing a common protocol for packetized information transfer (aka ‘the Internet’) has revolutionized global communications. It’s spawned wealth-creating industries and sped up the innovation cycle.

More deeply linking the world for energy — primarily electricity and liquid/gaseous natural gas/hydrogen — will create the kind of common protocols for transmitting energy from place to place that uniform data packets created for moving information.

In other words, ‘helicopter infrastructure expenditure’ represents a ‘Gaia Hypothesis’ (ie a self-healing system) solution to climate change and aging demographics. The challenge now is to seize the opportunity. The timing is right.

Global economic experts ranging from former US Treasury Secretary Larry Summers to major international banks now argue a major reorganization of the global economy is now needed. This would focus on investment and decarbonization.

The core institutions are in place: the Asian Infrastructure Investment Bank (AIIB), the Asian Development Bank (ADB), the World Bank, the International Energy Agency (IEA), the World Trade Organization (WTO) and others.

What’s needed now are common standards and universally-applied carbon pricing. These will provide the right signals for investment. Stated conversely, climate change represents a failure to correctly price carbon. Rising sea levels and more destructive weather are the paybacks of this ‘market failure.’

The place to start is Asia. There, the world’s largest regional economy is taking shape. It includes China, South Korea, Japan, the Association of Southeast Asian Nation(ASEAN) states, Australia, Papua New-Guinea and East Timor.

Together they represent the world’s most dynamic regional economy. Much of the region is being built out with infrastructure for the first time: power lines, gas pipelines, roads, rail and telecommunications.

The challenge now is to create the technical and marketplace standards to encourage interconnection and to create aggregated, cross-border markets governed by pan-Asian demand-supply price signals for carbon-adjusted energy.

Properly run, China’s AIIB can be in the forefront here — at least over the short-term. The AIIB already has announced two cautious initial infrastructure projects — both roadways.

Future projects — planned for the longer term, should include deepening electricity and natural gas interconnections between China, Japan and South Korea in Northeast Asia and China, the ASEAN states and Australia.

The Pan-Asian Energy Infrastructure emerging from this would include Joint Development Areas (JDAs) in the South China Sea.

Grenatec has proposed a series of South China Sea JDAs offering a template for this kind of bright future. These would connect promising offshore oil and gas fields to land and sea-based gas pipelines and power lines delivering their low-emission energy to downstream markets in the form of natural gas, electricity or hydrogen.

The model could then be extended southward to Australia and north and west to Russia,central Asia and eventually Europe. What’s needed now is to mesh all the good ideas for global infrastructure into a financial plan of investment to create the 21st Century global clean energy economy.

In the next five years, global carbon market reform will deliver broader coverage and much higher prices (to $20-$50 per tonne). These will expose LNG’s poor carbon economics.

Fourth, capital costs of pipelines are lower than for LNG. For intra-regional transport of natural gas, pipelines represent a better deal on both economic and technology grounds. Government capture– however — tilted decisions toward more LNG, a more lucrative business for industry.

That bet’s now going wrong. The result is an albatross industry. The evidence:an oversupplied regional Asian LNG market where spot market prices have fallen so low they now more than offset financial penalties of failing to honor long-term delivery contracts.

That, in turn, is rapidly breaking down the industry’s preferred sinecure of long-term pricing.

It’s the horror scenario for LNG insiders who deliberately excluded key variables from their economic analysis. These include carbon pricing and the advantageous multi-fuel advantages of pipelines.

The current mayhem will mark the evolution of a regional LNG spot market priced on ‘demand pull’ signals generated by consumers instead of ‘supply-push’ factors favoring producers. That’s the market Asia should have gotten all along.

In response, some LNG shipping capacity and upstream natural gas production will be mothballed. This is already happening in Australia’s overbuilt LNG export port of Gladstone, Queensland.

Billions in write downs will follow over time, revising downward future calculations about the intra-Asian LNG market’s economic value. That will lead to consideration of alternative delivery methods for natural gas that are less capital and carbon intensive.

An ideal new system would enable natural gas to be ‘pulled’ into the market as needed in response to demand instead of ‘pushed’ into the market by companies with expensive, bespoke, infrastructure to pay off.

The problem is one of vertical integration. LNG producers mine the gas, build the LNG shipping facilities and LNG ships. They’ve bet the farm on everything going right with all three all the time.

By contrast, an open-access, common-carrier, multi-fuel pipeline would be built, operated and maintained by an unrelated middle party. Financing of natural gas transport would be divorced from the economics of upstream production and downstream sale.

A pipeline would sell access to all comers, changing transport prices in response to market demand. The example here is the United States. There,an open-access, common-carrier merchant pipeline network is open to all comers.

It features its own ‘spot’ market price (aka the Henry Hub)quoted on a day-to-day, moment-to-moment basis.

The future of global energy markets lies in networks such as this. They have proved themselves in telecommunications (the internet), electricity (Europe’s increasingly integrated grids) and now natural gas (the US merchant pipeline system).

Furthermore, ‘just in time’ inventory management lowers the albatross of idled, high-fixed cost investments — such aslong construction lead time LNG facilities that are under utilized once finished. The only winners of that game are construction contractors.

This generates much better price signals than 20-year lock in, the model favored by the LNG industry on the grounds such certainty is required to justify large initial investment.

Offshore Vietnam is the only location in the South China Sea where Indian, Russian (Gazprom), US (Exxon-Mobil) and uninvited Chinese companies (like CNOOC) are all present.

As a small country, Vietnam must juggle the competiting attentions of northern commercial neighbor China, potential military protector America, regional power India and South China Sea wannabe Russia.

For example, Vietnam jointly explores for oil and gas with China in the Tonkin Gulf at the same time as it suffers bullying incursions from Chinese oil and gas exploration rigs in Vietnamese claimed waters further south.

Meanwhile, Russiais building nuclear reactors in Vietnam. India has oil and gas exploration blocks off South Vietnam, and the US is pressing for deeper access to Vietnamese military facilities like Cam Ranh Bay.

Handled adroitly, Vietnam can make a virtue of necessity from all the above. Vietnam’s oil and gas resources are the country’s biggest foreign currency earners. Vietnam’s crude oil reserves are second only to those of China in the immediate region.

In its south, Vietnam has well delineated offshore oil and gas fields and a fledgling pipeline system to bring these resources to shore near Ho Chi Minh city, its southern commercial capital.

Given this, a JDA could be located in unassigned oil and gas exploration blocks to the northeast of the Nam San Con field off Ho Chi Minh city. Some of the proposed JDA blocks would be same as ones CNOOC attempted to auction off in 2014, but got no takers.

Developing these more challenging blocs through a JDA would provide the rationale for building gas pipeline interconnections that could later be interconnected to create a South China Sea-wide network akin to the TAGP.

It would also provide a spur for Vietnam to build an accompanying terrestrial gas pipeline network, which it now lacks. Vietnam currently gets 30% of its power from coal, which needs to change. Gas pipelines can encourage the transition, as well as deepen cross energy market interconnection.

This terrestrial pipeline system could be built alongside — or along rights of way— of the plannned Kunming-Singapore high speed train system. It would also parallel proposed routes for the Trans-ASEAN Electricity Grid, which aims to deepen regional electricity transmission interconnections.

All of the above could be funded by China’s Asian Infrastructure Investment Bank (AIIB) and/or the Asian Development Bank (ADB) alongside precedent-setting AIIB/ADB investments in the Trans-ASEAN Gas Pipeline (TAGP).

Specifically, the TAGP project could connect to, among others, central Vietnam offshore oil and gas blocks now being developed by Petrovietnam and Exxon-Mobil.

That $20 billion project that will include a shallow water pipeline connecting the offshore fields to land south of Da Nang.

That in turn, could spur development of other, secondary fields up and down the coast, lowering costs and increasingly confidence. Ultimately, it would spur movement toward creating a regional market in natural gas. This would increase supply security, competition and lower prices.

A southern Vietnam JDA would join two other JDAs: between Da Nang and Triton Island off northern Vietnam and in the Reed Bank area of the southern Philippines.

May 2016 marks the 10-year anniversary of Al Gore’s film ‘An Inconvenient Truth.’ Gore’s film brought climate change to the world’s attention.

Between now and 2050, the battle against climate change will be won through carbon pricing, energy market reform and an interconnected global energy grid.

Since then a lot has changed – for the better.

Carbon pricing has been introduced. Over time, coverage will expand and prices will rise.

Trillions of dollars of perverse fossil fuel subsidies are coming under scrutiny. Over time, these subsides will be eliminated. This will shift investment from cheap dirty energy toward better, cleaner sources.

Renewable energy technology is improving very rapidly. This is creating a positive spiral of lower costs, increased demand and further take up.

It’s all happening at quickening speed. In a recent TED talk updating ‘An Inconvenient Truth,’ Gore’s argued the battle against climate change is now being won.

There is, however, still a downside.

Since 2006’s release of ‘An Inconvenient Truth,’ annual global carbon emissions have increased to early unprecedented levels. This is making the future behavior of Earth’s atmosphere harder to confidently model.

Recent heatwaves and warm winters are unprecedented. Storms are becoming stronger and more destructive. Ice sheets are shrinking at unprecedented ratesClearly, there is much work to be done.

But don’t underestimate the power of technology and societal change. Between now and 2040, global warming will worsen while carbon reduction solutions ramp up.The next 25 years will present the ultimate danger zone for the planet. Hard times lie ahead.

The reason: much of the past 10 years has been squandered fighting rear guard actions by fossil fuel interests denigrating scientific reality, Now that two of America’s biggest coal companies have filed for bankruptcy, things may change. As these albatrosses kill themselves off, technology and economics will come to the rescue.

The inspiring precedent is the computer age.

Over just 30 years, the internet (technology), the breakup of telecommunications monopolies (economic reform) and the spread of the mobile phone (market innovation) have changed human existence for the better.

In the next 30 years, the same process will occur with energy. During this time, a global energy grid will emerge (the technology), decentralized merchant energy production bought and sold in real time markets (economic reform), and micro-scale energy solutions linked to centralized marginal supplies (the conceptual equivalent of mobile phones).

The technology is in place. The plan is in place. The will is there. What’s needed is the economic plan.

What the world needs now is more than just zero interest rates create economic growth and avoid recession and deflation to take hold

Over the next 30 years, the world needs is a massive infrastructure investment plan to create a global energy grid. This grid will carry electricity and hydrogen from anywhere, to anywhere. Doing so will pull the global economy out of deflation.This will stimulate economic demand through large-scale infrastructure investment followed by the massive market efficiencies it creates.

Over time, the plan will pay for itself. Through taxing carbon and eliminating fossil subsidies, trillions of dollars can be freed for building the global clean energy infrastructure of tomorrow. Building this infrastructure will create a massive global economic stimulus with a powerful muliplier effect.

Given that such investment — properly constructed — can last a century or more, building it can create the long-lived investment repayment flows that can fund the huge looming costs of an aging global population.

The result will be a richer, healtthier, more peaceful, more economically effcient global economy at less existential risk.

Between now and 2020, the world should negotiate the pathway to a global energy grid by 2060. Already, template plans exist. These can be built out in stages. They could start with domestic infrastructure upgrades, followed by cross border interconnections, intra-regional interconnections followed by inter-regional network integration.

This was the template the Internet gave us. We should now apply it to energy.

Existing proposals for cross-border electricity interconnections will — over time — merge into a global energy internet following the pathways blazed by fiber optic cables.Sources: State Grid Corp of China, Siemens, Institute of Electrical and Electronics Engineers (IEEE), Grenatec, North Sea Offshore Grid Initiative, others.

In assessing the potential, consider just two numbers.

The first: fossil fuels subsidies amount to $5.3 trillion, according to the International Monetary Fund.

The second, all the needed technologies to solve climate change (apart from carbon capture and storage) can be implemented for carbon prices of $40 per tonne or lower, according to global management consultancy McKinsey.

Applying $40 carbon prices to all the world’s 40 billion tonnes of carbon emissions would generate $1.6 trillion a year.

Eliminating fossil fuel subsidies and applying $40 carbon pricing, therefore, will raise $6.9 trillion a year for reinvestment. That’s more than 8% of the global economy.

Building a global energy grid by 2050 would cost about $100 trillion, or about $3 trillion per year. This, according to State Grid Corp of China Chairman Liu Zhenya in his book entitled “Global Energy Interconnection.”

Economic savings from eliminating fossil fuel subsidies can be redeployed to investment in new globe spanning energy infrastructure across which zero emission energy can flow.

All of this amounts to the biggest ‘virtuous circle’ the world has ever seen.

The global proportion of the aged is growing. Pensions and social security programs are underfunded.

Large-scale investment funding in decarbonization paid for by carbon market reform can generate the needed cash flows for low emission infrastructure investment. This investment will then generate the income streams needed to pay the costs of an aging population.

By 2050, the can be connected by a series of hub-and-spoke power line and pipeline networks across which electricity and hydrogen — each fungible into the other — will flow.

This process will occur in three stages.

The first is deepening, broadening and upgrading national electricity grids to enable more long distance inter-regional trade in energy. China’s Three Gorges Dam is an example of that.

The second phase will be deeper cross border interconnection of national grids to bring on more renewable energy. Europe’s North Sea Offshore Grid Initiative is an example of this. The third and last phase will be interconnection of regions to allow regional interchange of surplus capacity.

The now world-spanning grid of fiber optics cables is an example of this, much of which has only been built out in the last few decades. The comparison is between fiber optics, power lines and gas pipelines is apt.

The reason is that units of energy — like packets of energy — are fungible. Given multi-destination conduits, markets will do the rest.

A global infrastructure ‘Marshall Plan’ aimed at solving climatate change — particularly one that pays for itself through already-needed economic reforms — may well be the key to 21st Century prosperity.

Instead of locating dozens of nuclear plants around Asia where they create huge accident, proliferation and terrorism risk, the entire industry should be concentrated at a secure, isolated, former military base in Australia’s isolated Outback.

When a nuclear accident occurs (an inevitability), the affected area can be evacuated, sealed and abandoned. This safeguards cities, a consideration neglected with Chernobyl and Fukushima.

Outback Australia is nearly three quarters the size of China. It has a population density of less than three people per square kilometer.

Parts of coastal China (such Fujian and Zhejiang), soon to be covered with dozens of nuclear plants have population densities of 500+ people per square kilometer.

Even the most devastating commercial nuclear accident in the unsettled remoteness of Australia’s Outback would pose no risk to wider humanity or the global economy.

The time is right for a mature discussion of ‘closed cycle,‘ Outback-generated nuclear power in Australia.

Australian Prime Minister Tony Abbott, Foreign Minister Julie Bishop, Energy Minister Martin Ferguson and former Australian government nuclear research scientist Ziggy Switkowski all now sing praise of nuclear power.

In 2006, Switkowski authored an admirably-detailed government research study on Australian nuclear power.1 In the report, he called for 50 nuclear reactors to be built in Australia by 2050.2

Serendipitously, the ideal Australian Outback location is now available: the uninhabited, underutilised, now-open-for-business Woomera Prohibited Area (WPA).

If 50 nuclear reactors were all built at Woomera, they could singlehandedly catalyse a large-scale, Australian Outback ‘closed cycle’ nuclear industry.

This would create the critical mass to attract additional proposed nuclear plants now being actively considered for highly-populated areas of Malaysia, Thailand, the Philippines, Vietnam and Singapore.

All by itself, the WPA is larger than South Korea, Greece or the US state of Ohio. It’s also surrounded by the nearly equally empty — but much larger — South Australia.

South Australia is twice the size of Thailand, three times the size of Japan, Vietnam or the Philippines. It’s seven-plus times larger than China’s Guangdong, Fujian or Shejiang provinces, where the bulk of China’s nuclear power plants will soon be built in highly-populated areas.

When the next nuclear accident occurs (on historical trends, around 2030) , it will almost certainly occur in China (due to China’s aggressive nuclear capacity buildout).

When it does, the the results will be devastating. In addition to creating a Chinese humanitarian disaster, it could also plunge the global economy into chaos given the pivotal role industrial China now plays in global supply chains.

A nuclear accident on the scale of Fukushima or Chernobyl in China, South Korea or Southeast Asia would wreak havoc on the integrated global economy.

Australian Outback ‘closed cycle’ nuclear power avoids this risk to populated areas. This represents an economic good with a net present value impossible-to-overstate.

The ‘now open for business’ WPAis tailor-made for the job.

Uranium mining already occurs there: at Prominent Hill and Olympic Dam, just outside the WPA’s eastern boundary. Separately, the eastern WPA’s Billa Kalina has been identified is one of the safest geological formations worldwide for storing unlimited nuclear waste for unlimited amounts of time.3

In the WPA’s remote southwest Maralinga,nuclear weapons were tested in the late 1950s and early 1960s4 — indicating nuclear pedigree.

With upstream uranium mining and downstream waste storage available in one place, the intermediate steps (enrichment and nuclear power) can easily be added — creating huge vertical (i.e. the nuclear production and waste-handling chain) and horizontal (electricity output) economies of scale.

All by itself, the numbers it suggests singlehandedly creates the business case for a high-voltage direct current power link from Australia to China.

Serendipitously, the global leader in HVDC technology — State Grid Corp. of China — now ownspart of South Australian electricity distributor Electranet, perhaps with something along these lines in mind.

Earlier this year, for instance, State Grid’s chairman Liu Zhenya proposed building Arctic Ocean wind farms to generate energy delivered to China over HVDC as part of Zhenya’s vision of an emerging ‘Global Internet of Energy.’

Elsewhere in Asia, State Grid is operating and upgrading the Philippine electricity grid under a 25-year contract.

Such a Pan-Asian low-emission energy ‘Silk Road’ could be funded by China’s Asian Infrastructure Investment Bank which Australia reportedly now plans to join.5 With State Grid as primary contractor and Australia as nuclear host, the arrangement would utilize the ‘comparative advantage’ of both countries.

Assuming multi-decade, trouble-free generation of ‘closed cycle’ nuclear at Woomera from, say, 2020-2060, the industry will have won sufficient public confidence to locate the subsequent generation of nuclear power plants closer to Asia’s cities — perhaps around 2060-2070 or so.

In addition to safeguarding population areas from nuclear accident risk, closing the nuclear cycle eliminates the ‘nuclear miles’ that dangerous material must travel. This in turn eliminates proliferation and terrorism risk.

In China uranium must now be imported, shipped to enrichment plants, shipped to nuclear plants, with waste then shipped for either reprocessing or burial.This all adds scope for mistakes, accidents or theft.

Naturally,China has learned from nuclear technology and operational mistakes made elsewhere. But that offers limited assurance. China also learned from international experience in building high-speed rail system, but that didn’t prevent a tragic accident from happening in China with the new technology.

Concentrating the nuclear industry in one place also better utilizes scarce global nuclear talent, significantly eroded by decades of controversy. The industry now faces deep skills shortages as young professionals sensibly avoid entering the industry.

Creating a closed-cycle nuclear power industry on a former government military installation also ensures security and can eliminate nuclear proliferation and/or theft of nuclear materials that can be used to make bombs.

It can also gain the industry a needed ‘social license’ and the confidence of the public

China plans to build 150,00MW of nuclear capacity by 2050, adding nearly a third to existing global capacity.

Embedded in all this is massive risk. The scale of the buildout is causing public protest6 ,7 from ordinary Chinese unconvinced the industry will remain completely safe over the long term.8

In Australia, even the worst, large-scale radiation release would need to travel multiples of the distances of Fukushima or Chernobyl’s radiation clouds to reach significantly-populated areas.

This guarantees public safety. That will increase public confidence. It removes a huge contingent financial risk from government in the form of a private sector nuclear disaster.9

In a ‘worst case’ nuclear accident scenario, the WPA can be evacuated, lockedat the service town of Pimba out and abandoned for centuries — even millenia.